There are other adventurers in Oblivion. However, during the Oblivion Crisis, few people should be travelling.
I don't remember any other adventurers who would actually change towns as the game went on, and do things that normal adventurers would do.
And as far as your 'few people should be traveling due to the crisis' excuse, that's a pretty big stretch as the majority of people had no reaction to Oblivion gates popping up all over the place. I doubt that thought process even crossed the minds of the devs as a reason to not have more realistic NPCs.
Also, Morrowind's cities aren't much larger than Oblivion's. Thanks to Oblivion's AI(which will likely be improved for TES V), cities are more alive than they have ever been
Morrowind's cities are still puny, but they felt better constructed and thought out than Oblivion's. The Imperial City felt very cramped to me, certainly not what I wanted out of the capital city of the empire.
The AI had better be improved a lot, as the over-hyped AI in Oblivion failed to live up to the majority of what it was advertised as, it's pretty well documented. It did very little to benefit the cities, or the entire game in general, IMO. It's cool in concept, but what they packaged with the game was neutered to the point of flat out lies with what was previously promised in pre-release previews.
Morrowind's cities felt dead due to lack of AI and Arena's and Daggerfall's cities felt dead due to the graphics and sounds being horrible(2D NPCs that don't make any noise, except for the guards that repeatedly say "halt" as if they were a bunch of mindless zombies).
Daggerfall's cities were the most realistic out of any of them, IMO. Hundreds of people doing their own thing, even if it is just wandering around aimlessly, it gave the illusion that the city could support itself. They go inside at night and the cities gate's close.
Graphics don't make a city feel/not feel dead. I'm honestly not sure how a technical limitation of Daggerfall concerning graphics and sound is being used against it in a debate about city size. Daggerfall kills Morrowind and Obvlivion in scope and all things dealing with cities and towns.